This important Act affects every business insurance arranged, renewed or amended after 12 August 2016.
The Insurance Act modernises insurance law and aims to make claiming from Insurers simpler and fairer. These benefits are however dependent on you providing the Insurer with a ‘fair presentation of risk’.
For a presentation to be regarded as fair there needs to be two elements, which are:
- You need to make adequate enquiries within your business to identify and verify information relevant to the risk concerned
- These must include all relevant knowledge of the ‘senior management’ of the business
- Reasonable enquiries must be made of any third party including consultants, contractors and anyone insured by the policy
‘Clear and Accessible’
- You are required to present information clearly to enable the Insurer to assess the risk. ‘Data dumping’ of large amounts of information, without signposting, is unacceptable
- There is an additional requirement for you to highlight unusual activities and/or any known area of concern that could affect the risk.
So what can Insurers do in the event that you fail to make a ‘fair presentation of risk’?
Under current law Insurers have only one remedy where the duty to disclose material information is not met, namely, full avoidance of the insurance policy. This is changing so that the consequences will vary depending on the reasons for failing to meet the duty of fair presentation, and depending on what the Insurer would have done differently had the duty been met at the outset. For further information on the potential consequences for failing to meet the ‘duty of fair presentation’, and other important considerations arising from the Act, visit
Key points to consider are:
- Material circumstances must be disclosed. These are circumstances which would have an effect on the mind of the prudent Insurer when assessing the risk.
- A ‘reasonable search’ will be necessary to identify material information. It is intended to include information held by persons or entities who are covered by the insurance, plus others who may hold information. Because of this, data gathering and renewal preparations may take you longer.
- You may need to devise new processes for data collection and submission to ensure all information held by persons or entities who are covered by the insurance, and others who hold information, are uncovered. These processes are likely to involve more people.
- Senior managers will need to be involved and need to be aware that they may not have cover if they do not get involved.
- You may need to consult other parties outside your organisation, e.g. consultants, agents, suppliers or those performing outsourced functions, to collect any material information that they may hold.
- Keep a record of all information that is disclosed to Insurers and the process you took in order to meet your reasonable search requirement.
Action now Required
For existing policyholders (prior to 12 August 2016) this will not affect you until your policy falls due for renewal or when you make a change under your policy. At renewal or when you make a change, you will need to follow the advice provided above to ensure that you are making the required ‘fair presentation of risk’. It would therefore be sensible to commence the process of reviewing the information that you have previously provided well in advance of your renewal date. If you need any advice and guidance please contact us accordingly.
For any new business insurance commencing on or after 12 August 2016, there is an immediate requirement to make a ‘fair presentation’ of risk. We will be helping you with this process and in practice, very little will actually change in the way that the quotations and insurances are arranged.
If you have any questions or require any further information regarding the Insurance Act 2015, please do not hesitate to contact the Independents team.